Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Capital Markets

RONN Motor Group Inc / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/ronn-motor-group-inc" target="_blank" data-smartkarma-citation="entities:28269:1" rel="noopener">RONN Motor Group Inc (RONN US)</a> (RMG), yet another optimistic US new energy vehicle (NEV) company, filed for an IPO this month, hoping to raise a maximum of USD 80mn. RMG focuses on manufacturing hydrogen fuel cell vehicles, expecting FCVs to dominate the transport industry in future. The company expects to issue 10m shares at an IPO price range between USD5 and USD8. While the company has filed for its IPO and issued pricing details, no trade date has been given. We analysed the company and its business model to see if the IPO would be successful (we have our doubts if the IPO would ever take place).
<div class="content-highlight">
Based on our first look, RMG seems to be a unique company that is attempting to highlight the potential of hydrogen vehicles but has not been able to execute its idea successfully yet. Despite the company’s creative and enviable vision, our favour for the company is hurt by the fact that leaders like <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> (Toyota Mirai) and <a href="https://www.smartkarma.com/entities/hyundai-motor-co-69840f36-ebfd-4bc3-b8ca-d3471255ec14" target="_blank" data-smartkarma-citation="entities:26936:1" rel="noopener">Hyundai Motor Co (005385 KS)</a> (Hyundai Nexo) who entered the area later than Ronn have capitalised on the idea better, while Ronn has only been able to build prototypes for the past ten years. The latter could be due to the company’s lack of funds to build manufacturing capacity. The company lists fuel cells, graphene stacks and nano-composites as development goals and is aiming to invest RMB30bn in Zhangqui, China – grand ambitions for a company that has no discernible commercial operations. Even comparing RMG with start-ups like Nio or with a young Tesla, the company still lags and in our opinion, an IPO looks doubtful. The only question in our minds really is, what is more delusional, a company that seeks a USD40bn valuation for being able to lock in massive losses or one that seeks a USD1bn valuation based on aims and little else?
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<div class="content-caption">Deal Specifics of Ronn’s Offering</div>
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<td colspan="2">
Details:
</td>
</tr>
<tr>
<td>
Filed S1
</td>
<td>
August 17th 2019
</td>
</tr>
<tr>
<td>
Offering Period
</td>
<td>
Open until the earlier of: (i) the maximum number of shares have been sold; (ii) twelve months from the date of effectiveness of this registration statement of which this prospectus forms a part.
</td>
</tr>
<tr>
<td>
Price Determination Date
</td>
<td>
Not given
</td>
</tr>
<tr>
<td>
Expected IPO price per share:  
</td>
<td>
Between USD 5 and USD 8
</td>
</tr>
<tr>
<td>
Number of Shares for IPO:
</td>
<td>
10m shares (NASDAQ or NYSE)
</td>
</tr>
<tr>
<td>
IPO base deal size: 
</td>
<td>
Approx. USD 65m (based on Median)
</td>
</tr>
<tr>
<td>
Major Shareholder  
</td>
<td>
Mr. Maxwell Ford (approximately 54.88% after share issue)
</td>
</tr>
<tr>
<td>
Use of Proceeds
</td>
<td>
* USD 15m (30%)- Automobile development
* USD 7m (33.6%)- R&amp;D on New Technology;
* USD 5m (10%) – offering expenses;
* USD 4m (8%) – Federal Motor Vehicle Safety Standards (FMVSS) testing and certification;
* The balance of USD 19m (38%)- legal, accounting and media/marketing expenses.
</td>
</tr>
</tbody>
</table>
<div class="content-remarks">
 Source: Company Prospectus
</div>
We go through the details below.

RONN Motor Group Inc (RONN US) (RMG), yet another optimistic US new energy vehicle (NEV) company, filed for an IPO this month, hoping to raise a maximum of USD 80mn. RMG focuses on manufacturing hydrogen fuel cell vehicles, expecting FCVs to dominate the transport industry in future. The company expects to issue 10m shares at an IPO price range between USD5 and USD8. While the company has filed for its IPO and issued pricing details, no trade date has been given. We analysed the company and its business model to see if the IPO would be successful (we have our doubts if the IPO would ever take place).

Based on our first look, RMG seems to be a unique company that is attempting to highlight the potential of hydrogen vehicles but has not been able to execute its idea successfully yet. Despite the company’s creative and enviable vision, our favour for the company is hurt by the fact that leaders like Toyota Motor (7203 JP) (Toyota Mirai) and Hyundai Motor Co (005385 KS) (Hyundai Nexo) who entered the area later than Ronn have capitalised on the idea better, while Ronn has only been able to build prototypes for the past ten years. The latter could be due to the company’s lack of funds to build manufacturing capacity. The company lists fuel cells, graphene stacks and nano-composites as development goals and is aiming to invest RMB30bn in Zhangqui, China – grand ambitions for a company that has no discernible commercial operations. Even comparing RMG with start-ups like Nio or with a young Tesla, the company still lags and in our opinion, an IPO looks doubtful. The only question in our minds really is, what is more delusional, a company that seeks a USD40bn valuation for being able to lock in massive losses or one that seeks a USD1bn valuation based on aims and little else?

Deal Specifics of Ronn’s Offering




Details:




Filed S1


August 17th 2019




Offering Period


Open until the earlier of: (i) the maximum number of shares have been sold; (ii) twelve months from the date of effectiveness of this registration statement of which this prospectus forms a part.




Price Determination Date


Not given




Expected IPO price per share:  


Between USD 5 and USD 8




Number of Shares for IPO:


10m shares (NASDAQ or NYSE)




IPO base deal size: 


Approx. USD 65m (based on Median)




Major Shareholder  


Mr. Maxwell Ford (approximately 54.88% after share issue)




Use of Proceeds


* USD 15m (30%)- Automobile development
* USD 7m (33.6%)- R&amp;D on New Technology;
* USD 5m (10%) – offering expenses;
* USD 4m (8%) – Federal Motor Vehicle Safety Standards (FMVSS) testing and certification;
* The balance of USD 19m (38%)- legal, accounting and media/marketing expenses.





 Source: Company Prospectus

We go through the details below.

Ronn Motor IPO: We May Have Found the One Company More “Optimistic” Than WeWork

United States

RONN Motor Group, Inc. operates as an automotive company. The Company designs zero emission transportation platform from automobiles, intercity buses, and fleet delivery trucks to hypercars. RONN Motor Group serves customers in the State of Arizona.

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